Facebook Motion To Approve Facebook V Fraley Preliminary Settlement

Case5:11-cv-01726-LHK Document188-3 Filed07/02/12 Page1 of 32
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COOLEY LLP MICHAEL G. RHODES, SBN 116127 mrhodes@cooley.com MATTHEW D. BROWN, SBN 196972 brownmd@cooley.com JEFFREY M. GUTKIN, SBN 216083 jgutkin@cooley.com 101 California Street, 5th Floor San Francisco, CA 94111-5800 Telephone: (415) 693-2000 Facsimile: (415) 693-2222 GIBSON, DUNN & CRUTCHER LLP S. ASHLIE BERINGER, SBN 263977 ABeringer@gibsondunn.com JENNIFER A. HALL, SBN 268480 JHall@gibsondunn.com 1881 Page Mill Road Palo Alto, California 94304 Telephone: (650) 849-5300 Facsimile: (650) 849-5333 FACEBOOK, INC. COLIN S. STRETCH (205144) (colin@fb.com) SANDEEP N. SOLANKI (244005) (ssolanki@fb.com) 1601 S. California Ave. Palo Alto, CA 94304 Telephone: (650) 853-1300 Facsimile: (650) 543-4800 Attorneys for Defendant FACEBOOK, INC. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION ANGEL FRALEY; PAUL WANG; SUSAN MAINZER; JAMES H. DUVAL, a minor by and through JAMES DUVAL, as Guardian ad Litem; and W.T., a minor, by and through RUSSELL TAIT, as guardian ad Litem; individually and on behalf of all others similarly situated, Plaintiffs, v. FACEBOOK, INC., a corporation; and DOES 1100, Defendants. [REDACTED VERSION] CASE NO. 11-CV-01726 LHK (PSG) DEFENDANT FACEBOOK, INC.S BRIEF IN SUPPORT OF PLAINTIFFS MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT
DEF. FACEBOOK, INC.S BRIEF IN SUPP. OF PLS. MOT. FOR PRELIM. APPROVAL OF SETTLEMENT CASE NO. 11-CV-01726 LHK (PSG)
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TABLE OF CONTENTS Page BACKGROUND AND INTRODUCTION.............................................................................. 1 ARGUMENT ............................................................................................................................ 4 A. The Potential Benefits to Class Members of Continued Litigation Are Remote and Uncertain ................................................................................................................ 4 All Users Expressly Consented to Appear in Sponsored Content .................... 5 Users Impliedly Consented to Appear in Sponsored Content........................... 6 Parents of Minor Users Impliedly Consented to the Use of Their Childrens Names and Profile Pictures in Sponsored Content.......................... 7 Plaintiffs Cannot Prove Economic Injury ......................................................... 7 Any Economic Damages Suffered Are De Minimis ......................................... 8 Plaintiffs Cannot Pursue Claims for Sponsored Content that Does Not Feature Names or Identifiable Photographs .................................................... 10 Sponsored Content Unrelated to Products, Merchandise, Goods or Services Is Not Actionable ............................................................................ 10 Sponsored Content Promoting News, Public Affairs, Sports, Political Campaigns and Other Matters in the Public Interest Is Exempt under Section 3344(d) ............................................................................................... 11 User Expression in Sponsored Content Is Protected by the First Amendment ..................................................................................................... 11 Plaintiffs Cannot Succeed on Their UCL Claim ............................................. 12 Facebooks Rebroadcast of Users Likes and Actions Is Immunized under Section 230 of the Communications Decency Act ............................... 13
The Risks, Expense, Complexity, and Likely Duration of Further Litigation Support Preliminary Approval .................................................................................... 14 The Proposed Settlement Provides Plaintiffs with Certain, Immediate Benefits that Directly Address the Allegedly Improper Practices and Are Substantially Related to the Aims of the Lawsuit ............................................................................. 16 Enhanced Notice and New Controls for All Class Members.......................... 16 Additional Settlement Benefits for the Minors Subclass ............................... 18 Substantial Cy Pres Award to Nationwide Online Privacy Groups................ 19 Retired Judge Edward Infante Determined that the Settlement provides tremendous benefits to the class and to the public........................ 20 i
1 2 3 4 E. 5 6 III. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 D.
TABLE OF CONTENTS (continued) Page Settlement Ensures Clarity and Resolution for Facebook, Its Users and Advertisers .................................................................................................................. 22 The Court Should Find that Facebook Complied with CAFAs Notice Procedures and Approve the Content and Manner of Transmitting the Class Notice. ......................................................................................................................... 24
CONCLUSION ....................................................................................................................... 25
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TABLE OF AUTHORITIES Page(s) Cases Abdul-Jabbar v. Gen. Motors Corp., 85 F.3d 407 (9th Cir. 1996)........................................................................................................... 10 Barnes v. Yahoo!, Inc., 570 F.3d 1096 (9th Cir. 2009)....................................................................................................... 13 Baugh v. CBS, Inc., 828 F. Supp. 745 (N.D. Cal. 1993) ............................................................................................... 11 Brown v. Entmt Merchs. Assn, 131 S. Ct. 2729 (2011) .................................................................................................................. 11 C.M.D. v. Facebook, Inc., No. 3:11-cv-00461 (S.D. Ill. June 1, 2011)................................................................................... 24 C.M.D. v. Facebook, Inc., No. 3:12-cv-01216-LHK (N.D. Cal. Apr. 20, 2012) .................................................................... 22 Carafano v. Metrosplash.com, Inc., 339 F.3d 1119 (9th Cir. 2003)....................................................................................................... 13 Catala v. Resurgent Capital Servs. L.P., No. 08-cv-2401 NLS, 2010 WL 2524158 (S.D. Cal. June 22, 2010) ........................................... 19 Class Plaintiffs v. City of Seattle, 955 F.2d 1268 (9th Cir. 1992)......................................................................................................... 4 Cohen v. Facebook, Inc., No. C 10-5282 RS, 2011 WL 5117164 (N.D. Cal. Oct. 27, 2011) ............................................. 7, 8 D.S. ex. rel. S.S. v. N.Y.C. Dept of Educ., 255 F.R.D. 59 (E.D.N.Y. 2008) .................................................................................................... 19 David Cohen v. Facebook, Inc., No. BC 444482 (L.A. Super. Ct. Apr. 26, 2011) .......................................................................... 22 Donovan v. Estate of Fitzsimmons, 778 F.2d 298 (7th Cir. 1985)......................................................................................................... 24 Erznoznik v. Jacksonville, 422 U.S. 205 (1975) ...................................................................................................................... 12 Evans v. Jeff D., 475 U.S. 717 (1986) ...................................................................................................................... 19 Ferrington v. McAfee, Inc., No. 10-CV-01455-LHK, 2012 WL 1156399 (N.D. Cal. Apr. 6, 2012).......................................... 4 Gionfriddo v. Major League Baseball, 94 Cal. App. 4th 400 (2001) ......................................................................................................... 11 iii
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TABLE OF AUTHORITIES (continued) Page(s) Goddard v. Google, Inc., 640 F. Supp. 2d 1193 (N.D. Cal. 2009) ........................................................................................ 13 Goldkorn v. County of San Bernardino, No. 06707VAP. 2012 WL 476279 (C.D. Cal. Feb. 13, 2012) .................................................. 25 Gordon v. Virtumundo, Inc., 575 F.3d 1040 (9th Cir. 2009)....................................................................................................... 23 Greenstein v. Greif Co., No. B200962, 2009 WL 117368 (Cal. App. Jan. 20, 2009) ........................................................... 6 Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998)......................................................................................................... 4 Harris v. Vector Mktg. Corp., No. C-08-5198 EMC, 2012 WL 381202 (N.D. Cal. Feb. 6, 2012)............................................... 22 Hoffman v. Capital Cities/ABC, Inc., 255 F.3d 1180 (9th Cir. 2001)....................................................................................................... 12 In re Agent Orange Prod. Liab. Litig. MDL No. 381, 818 F.2d 145 (2d Cir. 1987) ............................................................................................................ 5 In re Bluetooth Headset Prod. Liab. Litig., 654 F.3d 935 (9th Cir. 2011)......................................................................................................... 21 In re Google Buzz Privacy Litig., No. C 10-00672 JW, 2011 WL 7460099 (N.D. Cal. June 2, 2011) ........................................ 19, 20 In re HP Laser Printer Litig., No. 07-0667 AG, 2011 WL 3861703 (C.D. Cal. Aug. 31, 2011) ................................................ 21 In re Pac. Enters. Sec. Litig., 47 F.3d 373 (9th Cir. 1995)................................................................................................... 4, 5, 14 In re Quantcast Advertising Cookie Litig., Case No. 2:10-cv-05484-GW-JCG (C.D. Cal.) ............................................................................ 20 In re Tableware Antitrust Litig., 484 F. Supp. 2d 1078 (N.D. Cal. 2007) .............................................................................. 4, 15, 16 In re TD Ameritrade Account Holder Litig., No. 072852 SBA, 2011 WL 4079226 (N.D. Cal. Sept. 13, 2011) ............................................. 25 In re TD Ameritrade Accountholder Litig., 266 F.R.D. 418 (N.D. Cal. 2009) .................................................................................................... 4 J.N. v. Facebook, Inc., No. 11-cv-2128 (E.D.N.Y. May 3, 2011) ..................................................................................... 22 iv
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TABLE OF AUTHORITIES (continued) Page(s) J.N.D. v. Facebook, Inc., No. 11-cv-03287 (N.D. Cal. July 5, 2011) .................................................................................... 22 Jones v. Corbis Corp., 815 F. Supp. 2d 1108 (C.D. Cal. 2011) .......................................................................................... 6 Kirby v. Sega of Am., Inc., 144 Cal. App. 4th 47 (2006) ......................................................................................................... 14 Levitt v. Yelp! Inc., No. C-10-1231 EMC, 2011 WL 5079526 (N.D. Cal. Oct. 26, 2011) ........................................... 13 Love v. Associated Newspapers, Ltd., 611 F.3d 601 (9th Cir. 2010)......................................................................................................... 14 Lowe v. S.E.C., 472 U.S. 181 (1985) ...................................................................................................................... 12 Mazza v. Am. Honda Motor Co., 666 F.3d 581 (9th Cir. 2012)......................................................................................................... 12 Mendoza v. Tucson Sch. Dist. No. 1, 623 F.2d 1338 (9th Cir. 1980)....................................................................................................... 18 Miller v. California, 413 U.S. 15 (1973) ........................................................................................................................ 11 Miller v. Collectors Universe, Inc., 159 Cal. App. 4th 988 (2008) ......................................................................................................... 9 Moshogiannis v. Sec. Consultants Grp., Inc., No. 5:10-cv-05971, 2012 WL 423860 (N.D. Cal. Feb. 8, 2012) .................................................... 4 Nachshin v. AOL, LLC, 663 F.3d 1034 (9th Cir. 2011)....................................................................................................... 19 Newton v. Thomason, 22 F.3d 1455 (9th Cir. 1994)........................................................................................................... 6 Officers for Justice v. Civil Serv. Commn, 688 F.2d 615 (9th Cir. 1982)................................................................................................... 16, 17 Parker v. Time Warner Entmt Co., L.P., 331 F.3d 13 (2d Cir. 2003) .............................................................................................................. 9 Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102 (9th Cir. 2007)....................................................................................................... 23 Riley v. Natl Fedn of the Blind of N.C., 487 U.S. 781 (1988) ...................................................................................................................... 12 v
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TABLE OF AUTHORITIES (continued) Page(s) Rodriguez v. W. Publg Corp., 563 F.3d 948 (9th Cir. 2009)......................................................................................................... 14 Six (6) Mexican Workers v. Ariz. Citrus Growers, 904 F.2d 1301 (9th Cir. 1990)................................................................................................. 19, 20 State Farm Mut. Auto. Ins. Co. v. Campbell, 558 U.S. 408 (2003) ........................................................................................................................ 9 Turpin v. Sortini, 31 Cal. 3d 220 (1982) ................................................................................................................... 10 Valentine v. NebuAd, Inc., No. 3:08-cv-05113-TEH (N.D. Cal. Aug. 16, 2011) .................................................................... 20 Vasquez v. Coast Valley Roofing, Inc., 266 F.R.D. 482 (E.D. Cal. 2010) ............................................................................................ 16, 21 Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011) .................................................................................................................. 15 Walter v. Hughes Commcns, Inc., No. 09-2136 SC, 2011 WL 2650711 (N.D. Cal. July 6, 2011) ..................................................... 23 Washington Mutual Bank v. Superior Court, 24 Cal. 4th 906 (2001) .................................................................................................................. 23 White v. Experian Info. Solutions, Inc., 803 F. Supp. 2d 1086 (C.D. Cal. 2011) ................................................................................ 5, 9, 15 Wright v. Schock, 742 F.2d 541 (9th Cir. 1984)......................................................................................................... 14 Statutes
20 28 U.S.C. 1715(b) ............................................................................................................................ 25 21 28 U.S.C. 1715(d) ............................................................................................................................ 25 22 Cal. Bus. & Prof. Code 17200 ........................................................................................................... 2 23 Cal. Civ. Code 3344 ..................................................................................................................... 2, 11 24 Cal. Civ. Code 3344(a) .......................................................................................................... 5, 14, 20 25 Cal. Civ. Code 3344(b)(1)................................................................................................................ 10 26 Cal. Civ. Code 3344(d) .................................................................................................................... 11 27 28 vi
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Defendant Facebook, Inc. (Facebook) hereby submits this brief in support of Plaintiffs Motion for Preliminary Approval of Class Action Settlement (Motion). I. BACKGROUND AND INTRODUCTION
The proposed settlement of this long-running class action promises to resolve conclusively and on a nationwide basis the rights and interests of Facebook users in connection with an evolving form of social advertising on Facebook, providing clarity, protection, and innovative controls to millions of users of Facebooks free, advertising-supported service. In addition to providing class members with transparency and control over the use of their names and likenesses in Sponsored Stories, the proposed settlement supplies millions of dollars of funding to organizations dedicated to protecting class members privacy interests in the rapidly evolving online landscape. Facebook operates the largest social networking service in the world, through which people around the globe share and connect with their friends, families, and communities. Sharing information with others is at the heart of the Facebook experienceit is the reason that hundreds of millions of users engage with Facebook on a regular basis. Facebook has developed a wide variety of groundbreaking tools that have created new modes of sharing and expression on the Internet. The Like button, for example, allows users to express support for and affiliate with companies, causes or organizations with a single click. Facebook users can also share their activities and connections by Checking-in to an event or concert, commenting on a news article, or Voting in a Facebook poll. Facebook supports the operational costs of furnishing free, customized, real-time content to over 900 million users worldwideat a current cost of almost $2 billion annuallythrough advertising. (Decl. of Catherine Tucker in Supp. of Def.s Oppn to Class Certification (Tucker Decl.) 87, ECF No. 144; Decl. of James C. Squires in Supp. of Facebook, Inc.s Oppn to Pls. Mot. for Class Certification (Squires Decl.) 56, ECF No. 145; Decl. of Jeffrey M. Gutkin in Supp. of Facebook, Inc.s Br. in Supp. of Pls. Mot. in Supp. of Prelim. Approval of Settlement (Gutkin Decl.) Ex. A, filed concurrently herewith).) Like much of the advertising-supported Internet, Facebook has sought to engage users by personalizing promotional content on its service. (Tucker Decl. 4.) Since Facebook first launched the Fan button more than four years ago, it has published stories about a users interactions with Facebooks social tools to audiences approved by the user, along with his or 1
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her name and/or profile photo and, oftentimes, with related commercial or sponsored content. More recently, Facebook began publishing users Likes and social actions in Sponsored Stories, an evolving form of sponsored content displayed only to those people users have specifically authorized to view this shared content. Plaintiffs (and other litigants raising similar claims) have targeted this practice, asserting that the rebroadcast of users Likes and social actions to their friends in sponsored content, specifically Sponsored Stories, violates Californias right of publicity statute, Cal. Civ. Code 3344, and Unfair Competition Law, Cal. Bus. & Prof. Code 17200 (UCL). Plaintiffs have asserted these claims on behalf of a nationwide class encompassing more than 100 million Facebook users in the United States whose content has been rebroadcast in the form of a Sponsored Story. Facebook has vigorously defended these claims and invoked numerous defenses that create significant obstacles for Plaintiffs in this and other similar cases. Most fundamentally, Facebook obtains express permission to rebroadcast users Likes and social actions with sponsored content to their chosen audience under the Statement of Rights and Responsibilities (SRR). By joining and using Facebook, all members agree that their name and profile picture may be associated with commercial, sponsored, or related content (such as a brand [the User] like[s]) and that Facebook has permission to use [the Users] name and profile picture in connection with that content . . . . (Decl. of Ana Yang Muller in Supp. of Facebook, Inc.s Oppn to Pls. Mot. for Class Certification (Muller Decl.) Ex. I, at FB-FRA_000530, ECF No. 147-9, current version available at https://www.facebook.com /legal/terms.) In addition to the express consent established by Facebooks user terms, overwhelming evidence and authority establishes, inter alia, that: (i) users implicitly consented to the challenged practices by sharing Likes and social actions with the knowledge, or at least awareness, that this content could be rebroadcast in a commercial context to others of their choosing; (ii) users were not injured or damaged by the rebroadcast of stories about their Likes and social actions to those who already had access to that content (and, in fact, users received direct benefits from these broadcasts, such as free products and information or support for causes that they care about); (iii) sponsored content displaying users Likes and other forms of expressionespecially content related to political campaigns, religious organizations, charitable 2
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causes and other matters in the public interestis exempt from liability under the express language of Section 3344 and the First Amendment; (iv) Plaintiffs have no evidence of detrimental reliance or any deceptive, unlawful or unfair conduct that could support a UCL claim; and (v) Facebooks rebroadcast of user-generated Likes and social actions is immunized under Section 230 of the Communications Decency Act. Given these (and numerous other) defensesas well as the costs and delay that would result from continued litigation of these complex issues through class certification, judgment, and appeal the risks of continued litigation here are particularly acute. Furthermore, if Facebook ultimately prevailed, Plaintiffs and the class could face responsibility for paying Facebooks attorneys fees under Section 3344s mandatory, two-way fee shifting provision. Additionally, the potential recovery to individual class memberseven in a best case outcome for Plaintiffswould be trivial. The proposed settlement, by contrast, offers immediate and substantial value to millions of Facebook users and squarely resolves the core complaints targeting social advertising on Facebook. After more than a year of vigorous litigation, the parties have reached a proposed settlement which would, among other things, create a series of innovative tools that will give users (and for minor users, their parents) significant transparency and additional controls over how and when the information they share is displayed in connection with sponsored content. Indeed, if the settlement is approved, all users for the first time will have the ability to view the subset of actions and other content they have shared that have been rebroadcast as Sponsored Stories, and to prevent further rebroadcasting if they so desire. Parents, moreover, will have the means to prevent their children from appearing in Sponsored Stories altogether. Facebook will also contribute $10 million to leading organizations dedicated to protecting the interests and privacy of Internet and social media usersan amount that dwarfs the trivial recovery that might otherwise be obtained by individual class members here. Finally, the settlement would resolve any doubts concerning the scope and application of Facebooks SRR to commercial and sponsored content like Sponsored Stories. By clarifying the rights and obligations of Facebook and its userswhile providing immediate and valuable relief to millions of individuals who continue to actively use Facebookthe settlement ensures that Facebook 3
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can focus on innovating on behalf of users without the cost and disruption of continued class action litigation. For these reasons, Facebook supports Plaintiffs request to preliminarily approve the proposed settlement as fair, adequate, and reasonable. II. ARGUMENT
The Ninth Circuit has adopted a strong judicial policy that favors settlements in complex class actions. Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992.) Accordingly, a court may approve a proposed settlement if it is fundamentally fair, adequate, and reasonable. Moshogiannis v. Sec. Consultants Grp., Inc., No. 5:10-cv-05971, 2012 WL 423860, at *2 (N.D. Cal. Feb. 8, 2012) (quoting Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998).) A proposed settlement meets this standard for preliminary approval purposes where it appears to be the product of serious, informed, non-collusive negotiations, has no obvious deficiencies, does not improperly grant preferential treatment to class representatives or segments of the class, and falls within the range of possible approval. In re Tableware Antitrust Litig., 484 F. Supp. 2d 1078, 1080 (N.D. Cal. 2007) (citation omitted). A. The Potential Benefits to Class Members of Continued Litigation Are Remote and Uncertain To evaluate the sufficiency of the proposed settlement here, the Court must compare the anticipated rewards of litigation for Plaintiffs and the proposed class with the overall value of the settlement offer. See, e.g., Ferrington v. McAfee, Inc., No. 10-CV-01455-LHK, 2012 WL 1156399, at *8 (N.D. Cal. Apr. 6, 2012) (the need to compare the terms of the compromise with the likely rewards of litigation is [b]asic to the process of deciding whether a proposed settlement is fair, reasonable and adequate) (quoting In re TD Ameritrade Accountholder Litig., 266 F.R.D. 418, 422 (N.D. Cal. 2009).) Even if the potential recovery might [be] large, a proposed settlement is fair, adequate, and reasonable where plaintiffs odds of winning [are] extremely small. In re Pac. Enters. Sec. Litig., 47 F.3d 373, 378 (9th Cir. 1995) (affirming class settlement where strong defenses may have adversely terminated the litigation before trial). As detailed below, Plaintiffs are unlikely to obtain any award in the event of continued litigation. Plaintiffs face numerous and insurmountable obstacles, including several dispositive 4
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defenses and numerous issues of first impression implicated by their novel claims. Failure to overcome any one of these obstacles would drastically reduce or eliminate Plaintiffs claims against Facebook. See id.; In re Agent Orange Prod. Liab. Litig. MDL No. 381, 818 F.2d 145, 173-74 (2d Cir. 1987) (holding that settlement was reasonable where plaintiffs faced formidable hurdles in establishing exposure, causation and liability and in overcoming the military contractor defense); White v. Experian Info. Solutions, Inc., 803 F. Supp. 2d 1086, 1095 (C.D. Cal. 2011) (holding that settlement was reasonable where [p]laintiffs claims largely presented questions of first impression). Retired Judge Edward A. Infante, a neutral mediator engaged by the parties, concurs. Indeed, after conducting a thorough evaluation of the strength of Plaintiffs claims, he concluded that Plaintiffs face substantial risk . . . with respect to summary judgment, trial and appeal. (See Decl. of Hon. Edward A. Infante (Ret.) in Supp. of Pls. Mot. for Prelim. Approval of the Proposed Class Settlement (Infante Decl.) 12, ECF No. 178; see also id. 13-15 (discussing risks).) 1. All Users Expressly Consented to Appear in Sponsored Content
Most fundamentally, Plaintiffs cannot prove an essential element of their claim: that they did not consent to the use of their Facebook names and profile pictures in Sponsored Stories. See 3344(a). To the contrary, consent to Sponsored Stories is established, as a matter of law, by the SRR applicable to all Facebook users. The SRR expressly states that your name and profile picture may be associated with commercial, sponsored, or related content (such as a brand you like) and that [y]ou give us permission to use your name and profile picture in connection with that content, subject to the limits you place. (Muller Decl. Ex. I, at FB_FRA_000530 (emphasis added).) Plaintiffs concede, as they must, that all users are bound by the SRR and that all prior versions of the SRR contained this critical term. (Pls. Mem. of Law in Supp. of Mot. for Class Certification 8-9; Pls. Reply Mem. of Law in Supp. of Mot. for Class Certification (Reply Br.) 4.) Although Plaintiffs originally alleged a theory of fraudulent inducement that may have been sufficient to overcome the SRRs consent provisions on a motion to dismiss (see Order Granting in Part and Den. in Part Def.s Mot. to Dismiss (MTD Order) 24, ECF No. 74), Plaintiffs apparently abandoned this theory in the absence of any factual supportremoving any conceivable claim that Facebook lacked valid consent to rebroadcast users Likes and social actions with sponsored content, such as 5
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Sponsored Stories. 2. Users Impliedly Consented to Appear in Sponsored Content
Separately, Plaintiffs also cannot prove a lack of consent because users impliedly consented to have their Likes and other social actions displayed to their friends by taking steps to share those Likes and actions with the knowledge or awareness that this content could be rebroadcast, including in sponsored contexts. See, e.g., Newton v. Thomason, 22 F.3d 1455, 1461 (9th Cir. 1994) (plaintiff impliedly consented to the use of his name where his conduct indicated that he did not object to the use); Jones v. Corbis Corp., 815 F. Supp. 2d 1108, 1113-15 (C.D. Cal. 2011) (plaintiff impliedly consented to the use of her name and photograph by posing for red carpet photos, knowing that photographers may use those photos to solicit sales); Greenstein v. Greif Co., No. B200962, 2009 WL 117368, at *9-10 (Cal. Ct. App. Jan. 20, 2009) (plaintiff impliedly consented where he was aware that [he was] being recorded as part of the reality television program and did not object). A users decision to, for example, Like a charity or Check In to a sporting event on Facebookby its very natureimplies consent to publish that action to others designated by the user. Facebook furnished overwhelming evidence that users expect and even intend for these actions to be broadcast in commercial contexts, and each Plaintiff conceded that he or she fully understood that Likes would be shared in this manner. (Def. Facebook, Inc.s Oppn to Pls. Mot. to Certify a Class (Oppn Br.) 9-15, ECF No. 141; Tucker Decl. 39, 42, 48-49.) Indeed, Facebook has broadcast users names and social actions with related commercial content for years. Since Facebook first launched the Fan tool in 2007, it has published users connections with organizations, causes, brands or products in many locations across the site. Likewise, Facebook has displayed users Facebook names and Likes with related commercial content (in a product known as Social Ads) for over four years. (Oppn Br. 12; Tucker 22.) Because the broadcast of users Likes and social actions has long been associated with commercial content (whether displayed in users News Feeds, their profiles or timelines, or the sponsors Page), Plaintiffs cannot credibly show that they consented to the display of their social actions in certain commercial contexts but not in Sponsored Stories. (Oppn Br. 11-12; Tucker Decl. 20, 22-24, 29, 34, 36-37, 43.) 6
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3.
Parents of Minor Users Impliedly Consented to the Use of Their Childrens Names and Profile Pictures in Sponsored Content
Likewise, substantial evidence demonstrates parental consentexpress and impliedto minor class members use of Facebook, acceptance of the SRR and, specifically, sharing of Likes and actions in commercial or sponsored contexts. (Oppn Br. 14-15.) Indeed, a named Plaintiff representative of the minors subclass reviewed Facebooks SRR with his father when his father expressly permitted him to sign up to use Facebook by agreeing to the SRR. (Decl. of Matthew D. Brown in Supp. of Facebook, Inc.s Oppn to Pls. Mot. for Class Certification (Brown Decl.) 67-70, ECF No. 146.) As with this example, millions of parents participate actively in or are at least aware of their childrens activities on Facebook, are in many cases Facebook friends with their children, have seen their childrens Likes and actions published to them in social ads or other commercial contexts, or even clicked on a Sponsored Story publishing their childs Like (to support a school fundraising effort, for example). (Decl. of Christopher Plambeck in Supp. of Facebook, Inc.s Oppn to Pls. Mot. for Class Certification (Plambeck Decl.) 21, ECF No. 142 (over six million minor users were friends with at least one of their parents as of December 2011); see also Brown Decl. Ex. NN, at 3, ECF No. 146-40 (recent study found that 72 percent of parents monitor their teens social networking accounts); Gutkin Decl. Ex. B, at 69, 71 (recent study found that six in ten teens report that their parents have checked their social media profile); Gutkin Decl. Ex. C (recent study found that 92% of parents surveyed were Facebook friends with their children and 72% have access to their childrens password); Gutkin Decl. Ex. D, at 11 (recent study found that 64% of parents knew when their child created his or her Facebook account and helped the child create the account).) 4. Plaintiffs Cannot Prove Economic Injury
Plaintiffs also cannot demonstrate that they or the putative members of the class were injured by the republication of their Likes and actions in sponsored content, as required to prove their misappropriation claims under Section 3344 and to demonstrate Article III standing. See Robyn Cohen v. Facebook, Inc., No. C 10-5282 RS, 2011 WL 5117164, at *3 (N.D. Cal. Oct. 27, 2011) (holding that statutory damages provision in 3344 does not eliminate the requirement of a 7
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cognizable injury in the first instance). Indeed, Plaintiffs own expert admitted that a significant number of class members suffered no economic injury. (See Oppn Br. 20-21.) Most fundamentally, Plaintiffs cannot establish that they were economically injured by the rebroadcast of their Likes and social interactions to friends who already had access to that content. See Cohen, 2011 WL 5117164, at *3 (the fact that plaintiffs names and likenesses were merely displayed on the pages of other users who were already plaintiffs Facebook friends and who would regularly see, or at least have access to, those names and likenesses in the ordinary course of using their Facebook accounts . . . undercuts any claim plaintiffs can make that they were somehow harmed). Indeed, discovery has confirmed that none of the named Plaintiffs can point to any instance in which a Sponsored Story diminished the value of their names or likenesses or in any way deprived them of an economic opportunity that they otherwise could have obtained on their own. (Gutkin Decl. Exs. E-G, K-M.) Moreover, because Plaintiffs alleged an economic injury, Plaintiffs must demonstrate that they were not compensated for Facebooks commercial use of their names and likenesses . . . . (MTD Order 24; see also id. at 11 (addressing Article III standing and finding that Plaintiffs alleged that they were economically injured when denied compensation for such unauthorized use).) Discovery has confirmed, however, that millions of usersincluding Plaintiffswere, in fact, compensated for the rebroadcast of their Likes and actions in sponsored content. (Tucker Decl. 6, 7.) Indeed, users receive a range of tangible and intangible benefits for sharing their affiliations on Facebook, encompassing coupons, discounts, support or fundraising for a political or charitable cause, or increased esteem or cache within their peer groups. (Id. 6.) And, in many or even most instances, these user benefits are substantially more valuable than the modest revenue (if any) earned by Facebook from the rebroadcast. (Id. 7.2.) 5. Any Economic Damages Suffered Are De Minimis
Even if Plaintiffs could somehow establish injury for the mere rebroadcast of their Likes and social actions to the same audience that has already seen them, they would face significant challenges in proving damageswhich would be minimal, even in a best case outcome. As this Court noted, at summary judgment or at trial, Plaintiffs may not simply demand $750 in statutory damages in 8
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reliance on a bare allegation that their commercial endorsement has provable value, but rather must prove actual damages like any other plaintiff whose name has commercial value. (MTD Order 29 (quoting Miller v. Collectors Universe, Inc., 159 Cal. App. 4th 988, 1006 (2008)).) Indeed, statutory damages under Section 3344 are only meant to compensate non-celebrity plaintiffs who suffer . . . mental anguish yet no discernible commercial loss. Miller, 159 Cal App. 4th at 1006 (emphasis added). Plaintiffs have not alleged mental anguish, nor could they credibly do so because Sponsored Stories are merely republications of content they previously shared with their friends. And even if Plaintiffs could recover statutory damages herewhich they cannotan aggregate award would implicate substantial due process concerns. See, e.g., Parker v. Time Warner Entmt Co., L.P., 331 F.3d 13, 22 (2d Cir. 2003) (noting that aggregation in a class action of large numbers of statutory damages claims potentially distorts the purpose of both statutory damages and class actions with the result the due process clause might be invoked in order to nullify that effect and reduce the aggregate damage award) (citing State Farm Mut. Auto. Ins. Co. v. Campbell, 558 U.S. 408, 416 (2003).) In such circumstances, it is fair for settling parties to consider the risk that any large, cumulative statutory damages award obtained at trial ultimately might have been reduced by the trial or appellate courts. White, 803 F. Supp. 2d at 1098. Indeed, at least one court has held that this risk justified a settlement recovery constituting a 99% reduction of the minimum, aggregate amount of statutory damages available to plaintiffs. See id. (given this and other risks, it was not unreasonable for Settling Plaintiffs to decide that a guaranteed recovery [of the drastically reduced amount] was better than the risk of no recovery at all). In any event, the maximum recovery to individual class members here is trivial. Indeed, Plaintiffs own expert has estimated that the average revenue earned by Facebook in 2011 that is attributable to the use of each class members Facebook name and likeness is . (See
Decl. of Fernando Torres in Supp. of Pls. Mot. for Class Certification 8(y).) And even this de minimis number overestimates the value of Plaintiffs claims, as their methodology suffers from numerous incurable flaws. See White, 803 F. Supp. 2d at 1097 (rejecting contention that settlement was unfair where objectors valuation of potential claims rel[ied] on controversial variables). First, Plaintiffs expert acknowledged that his method is likely to include 5-10% of class members whose 9
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endorsement values are zero or negative. (Oppn Br. 20-21.) Second, his methodology attributes all of the performance differences between Sponsored Stories and other forms of advertising to a users endorsement, and ignores numerous other factors that Facebooks expert showed accounted for most or all of any observed differences. (Id.; Decl. of Randolph E. Bucklin in Supp. of Defs. Oppn to Class Certification (Bucklin Decl.) 56-63, 72-74, ECF No. 148; Tucker Decl. 75-76.) Third, it ignores that, in some cases, Facebook could have earned more revenue from serving an advertisement other than a Sponsored Story. (Oppn Br. 20-21; Bucklin Decl. 47-48, 85-87.) Finally, it fails to consider the value of the benefits and compensation that individual class members received for the rebroadcast of their content in Sponsored Stories. (Oppn Br. 20-21; Section II(A)(4), supra); see Turpin v. Sortini, 31 Cal. 3d 220, 236 (1982) (any benefit conferred by a tortfeasor is considered in mitigation of damages). Particularly given these flaws, the value of Plaintiffs claims is minimal at best. Moreover, as addressed below, Plaintiffs damages calculations impermissibly include millions of rebroadcasted stories that are not actionable for multiple, independent reasons. 6. Plaintiffs Cannot Pursue Claims for Sponsored Content that Does Not Feature Names or Identifiable Photographs
Many of the rebroadcasted stories Plaintiffs challenge in this suit are not actionable because they do not feature users name[s], photograph[s] or likeness[es] within the meaning of Section 3344. See, e.g., 3344(b)(1) (a photograph is actionable only where the person is readily identifiable); Abdul-Jabbar v. Gen. Motors Corp., 85 F.3d 407, 416 (9th Cir. 1996) (whether plaintiffs birth name, Lew Alcindor, equals Kareem Abdul-Jabbar . . . is a question for the jury). Many Facebook usersincluding several of the Plaintiffsuse fictitious names and/or unrecognizable photographs or images that do not give rise to a claim for misappropriation under California law. (See Brown Decl. 55-56, 71-75, 77.) This further reduces the potential recovery. 7. Sponsored Content Unrelated to Products, Merchandise, Goods or Services Is Not Actionable
Likewise, Plaintiffs claims impermissibly encompass millions of Sponsored Stories relating to charitable, political or religious causes. Indeed, there are many such organizations that elect to 10
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sponsor stories users share with their friends. (Oppn Br. 17; Squires Decl. 76.) Plaintiffs ultimately conceded that such uses are not actionable under Section 3344, because they do not involve a use in connection with products, merchandise, goods or services, but made no effort to exclude these uses from their damages calculations. See 3344(a); Reply Br. 13 (conceding political content not actionable). 8. Sponsored Content Promoting News, Public Affairs, Sports, Political Campaigns and Other Matters in the Public Interest Is Exempt under Section 3344(d)
In addition, Section 3344 exempts from liability the use of a persons name or photograph in connection with any news, public affairs, or sports broadcast or account, or any political campaign. 3344(d); Baugh v. CBS, Inc., 828 F. Supp. 745, 754 (N.D. Cal. 1993) (the fact that [the challenged use] generates advertising revenue does not prevent [a defendant] from claiming immunity under 3344(d)). Indisputably, millions of Sponsored Stories concern uses that relate to one of these protected subject matters and thus are expressly excluded from the scope of the statuteincluding Sponsored Stories promoting political campaigns for national and local candidates, sports . . . accounts such as local charity races or soccer events, or public affairs such as breast cancer awareness. (Squires Decl. 48, 76; Tucker Decl. 65-67); see Gionfriddo v. Major League Baseball, 94 Cal. App. 4th 400, 414 (2001) (depiction of baseball players in materials promoting baseball excepted under 3344(d)). 9. User Expression in Sponsored Content Is Protected by the First Amendment
Likewise, chilling the republication of user content in Sponsored Storiesparticularly on topics (such as politics or religion) that are afforded the highest degree of constitutional protection raises significant First Amendment concerns. See Miller v. California, 413 U.S. 15, 34-35 (1973) (The protection given speech . . . was fashioned to assure unfettered interchange of ideas for the bringing about of political and social changes desired by the people.) (quotation marks and citations omitted). Even when users Like or comment on corporations or products, this may, depending on the circumstances and subjective motivations of the user, advance important goals of self-expression especially for younger users, who often cite self-expression as a reason for using the Facebook Like button. (Tucker Decl. 53); see Brown v. Entmt Merchs. Assn, 131 S. Ct. 2729, 2735 11
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(2011) (Minors are entitled to a significant measure of First Amendment protection) (quoting Erznoznik v. Jacksonville, 422 U.S. 205, 212-13 (1975)); Lowe v. S.E.C., 472 U.S. 181, 210 n.57 (1985) ([W]e have squarely held that the expression of opinion about a commercial product such as a loudspeaker is protected by the First Amendment.) (citation omitted). Because the expressive modes of sharing that can lead to a Sponsored Story are inextricably intertwined with the commercial aspects of a Sponsored Story, any constraint on Facebooks rebroadcast of these stories would likely run afoul of the First Amendment. See Riley v. Natl Fedn of the Blind of N.C., 487 U.S. 781, 796 (1988); Hoffman v. Capital Cities/ABC, Inc., 255 F.3d 1180, 1185 (9th Cir. 2001). 10. Plaintiffs Cannot Succeed on Their UCL Claim
Plaintiffs also failed to develop any evidence that could support a claim under the UCL. Although Plaintiffs originally alleged that the SRR somehow misled users regarding the ability to opt out of Sponsored Stories (see Second Am. Class Action Compl. for Damages (SAC) 32-33, ECF No. 22), Plaintiffs concede that they did not detrimentally rely on these terms as required to establish fraud under the UCL. See, e.g., Mazza v. Am. Honda Motor Co., 666 F.3d 581, 591 (9th Cir. 2012) (UCL requires named class plaintiffs to demonstrate reliance). To the contrary, the named Plaintiffs expressly disclaim having read (or having any memory of reading) the terms they challenge. (See Brown Decl. 78.) More fundamentally, Plaintiffs concede that Facebook informed users that there is no way to opt out of seeing all or being featured in any Sponsored Stories, belying any claim that Facebook failed to inform users of these facts. (SAC 34.) Likewise, Plaintiffs failed to establish any support for a claim under the UCLs unlawful prong because, as discussed above, they cannot demonstrate that Sponsored Stories violate Section 3344 or any other California law. Nor could Plaintiffs possibly demonstrate that the republication of Likes and social actions in sponsored content is unfair under the UCL. Facebooks usersincluding some of the Plaintiffs choose to Like companies and causes specifically to share that content with their friends and family, and they derive substantial benefits when their Likes and actions are rebroadcast, including in Sponsored Stories, to the same audience. (Tucker Decl. 6.) Indeed, several Plaintiffs admitted they Liked content to share the story with as many people as possible. (Brown Decl. 65-66.) 12
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11.
Facebooks Rebroadcast of Users Likes and Actions Is Immunized under Section 230 of the Communications Decency Act
Because Plaintiffs claims arise exclusively from Facebooks republication of content generated entirely by the usernamely, the users Likes and other social actions the user has decided to share on FacebookFacebooks conduct is protected under Section 230 of the Communications Decency Act (CDA). See Carafano v. Metrosplash.com, Inc., 339 F.3d 1119, 1123 (9th Cir. 2003) ( 230 provides broad immunity [to websites that] publish[] content provided primarily by third parties). Although Plaintiffs complaint alleged that Facebook itself had somehow created new content in Sponsored Stories (SAC 57-59), discovery has disproved this bald claim. Instead, the allegedly misappropriated content that is rebroadcast in Sponsored Storiesfor example, the assertion that Jane Doe Likes Senator Xis generated entirely through the actions of the user. (See Gutkin Decl. Ex. H, I.) Facebook in no way contributes to the substance of the users Like or action, but rather offers neutral tools in the form of a Like button or other mechanism through which users may share their support and affiliation with companies, organizations, causes and events of their choosing. See, e.g., Carafano, 339 F.3d at 1125 (defendant immune where the information about which plaintiff complained was transmitted unaltered to profile viewers); Goddard v. Google, Inc., 640 F. Supp. 2d 1193, 1197 (N.D. Cal. 2009) (A website operator does not become liable as an information content provider . . . when it merely provides third parties with neutral tools to create web content.). And it is well-settled that Facebook is not transformed into a content provider merely by republishing users Likes and other social actions in a sponsored context, such as Sponsored Stories; the decision to publish or post user content is at the heart of CDA immunity. See Barnes v. Yahoo!, Inc., 570 F.3d 1096, 1105 (9th Cir. 2009) ( 230 shields from liability all publication decisions, whether to edit, to remove, or to post, with respect to content generated entirely by third parties) (emphasis added); Levitt v. Yelp! Inc., No. C-10-1231 EMC, 2011 WL 5079526, at *6 (N.D. Cal. Oct. 26, 2011) (traditional editorial functions immunized by 230 often include subjective judgments informed by political and financial considerations).
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B.
The Risks, Expense, Complexity, and Likely Duration of Further Litigation Support Preliminary Approval Given the significant likelihood that Facebook would prevail in defeating Plaintiffs claims on
one or more of the grounds addressed above, the risks of continued litigation to Plaintiffs and absent class members are particularly substantial here. (Infante Decl. 14.) Indeed, Section 3344 requires the court to award mandatory attorneys fees and costs to [t]he prevailing party, including to a prevailing defendant. 3344(a); see Kirby v. Sega of Am., Inc., 144 Cal. App. 4th 47, 62 (2006); Love v. Associated Newspapers, Ltd., 611 F.3d 601, 614 (9th Cir. 2010.) In light of the mandatory, two-way fee shifting provision in Section 3344, if a litigation class were certified, Plaintiffs and absent class members that elected to remain in the class could face the prospect of satisfying a substantial fee award. See Wright v. Schock, 742 F.2d 541, 545 (9th Cir. 1984) (Absent class members have no obligation to pay attorneys' fees and litigation costs, except when they elect to accept the benefit of the litigation.) (emphasis added); In re Pac. Enters. Sec. Litig., 47 F.3d 373, 378 (9th Cir. 1995) (affirming approval of settlement where district court concluded that the settlement eliminated significant risk). These risks are compounded by the breadth and complexity of issues presented in this litigation, which would require both sides to expend substantial fees and resources to litigate the case through judgment and appeal. Indeed, this case has been pending for more than a year, encompassing extensive discovery (more than 1,000 discovery requests and 200,000 pages of documents), and 21 depositions, including the deposition of 7 experts. (Pls. Mot. for Prelim. Approval of Class Action Settlement at 13, ECF No. 181; Infante Decl. 3.) The parties would be required to spend substantial additional resources to litigate this case through summary judgment or trial, which at a minimum would consume several additional months of intensive litigation activity. See Rodriguez v. W. Publg Corp., 563 F.3d 948, 966 (9th Cir. 2009) (length and expense of continued litigation favored settlement where parties still had to contend with a number of serious hurdles, such as Daubert motions, an anticipated motion for summary judgment, a motion to bifurcate, and appeals). And given the differences within and the unprecedented size of the proposed class (potentially more than 100 million users), as well as the implications of Plaintiffs claims for Facebooks 14
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advertising-supported business model, Facebook would vigorously pursue an appeal of any certification order or judgment in favor of Plaintiffs and assumes that Plaintiffs would do the same in the event Facebook prevailed. See Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2546 (2011) (characterizing a proposed class of 1.5 million plaintiffs as one of the most expansive class actions ever). The extensive costs of continued litigationparticularly in the context of a mandatory, twoway fee shifting provisionweigh strongly in favor of preliminary approval. See In re Tableware, 484 F. Supp. 2d at 1080 (preliminarily approving proposed settlement in light of the expense and complexity of further litigation). Moreover, this case raises many significant issues of first impression that would be the subject of intensive (and expensive) appeals, including: (i) the measure of injury and damages for noncelebrity plaintiffs asserting claims under Section 3344 relating to the republication of their activity in social media; (ii) the extent to which republication of user-generated actions in social media in a sponsored context is protected by CDA Section 230; (iii) the extent of First Amendment protection for republication of user generated expression in social media, including in relation to commercial subject matter; and (iv) the extent to which classwide relief under Section 3344 would run afoul of the California Legislatures intent and the Rules Enabling Act. The numerous, unsettled legal issues in this case further increase the risks to Plaintiffs of an adverse outcome through litigation and underscore the benefits of the proposed settlement. See White, 803 F. Supp. 2d at 1095 (preliminarily approving proposed settlement [g]iven that [p]laintiffs claims largely presented questions of first impression). Continued litigation would also mean that members of the class may continue to appear in sponsored content without benefit of the clarity and enhanced controls provided in the proposed settlement. Given the rapid pace of change and innovation on Facebook and the Internet generally,1 the forms of social advertising challenged by Plaintiffs in this case likely will be superseded by new and unforeseen models during the several years it would take for this case to wind its way through
Indeed, as addressed in detail in the Tucker Declaration, the modes of sponsored content and social advertising on Facebook and the Internet have evolved rapidly and substantially since Facebook first was launched in 2004. (See Tucker Decl. 13-16, 20, 22-24, 29, 36-37, 43.) 15
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litigation and appeal. Thus, even in a best case litigation outcome for Plaintiffs, the modest relief they eventually could obtain after years of litigation and appeal may be meaningless; as noted previously, any damages award would be trivial on a per-user basis, while any injunctive relief directed to social advertising such as Sponsored Stories could be obsolete in several years due to intervening changes on the site. The substantial delays that would result from protracted litigation of this case provide further grounds for preliminary approval here. Officers for Justice v. Civil Serv. Commn, 688 F.2d 615, 629 (9th Cir. 1982) (approving settlement in class action where many years may be consumed by trial(s) and appeal(s) before the dust finally settles because any benefits above those provided by the [proposed settlement] would likely be substantially diluted by the delay inherent in acquiring them). C. The Proposed Settlement Provides Plaintiffs with Certain, Immediate Benefits that Directly Address the Allegedly Improper Practices and Are Substantially Related to the Aims of the Lawsuit While the risks of continued litigation are substantial and the potential benefits remote, the proposed settlement offers numerous significant and immediate benefits to the class. See In re Tableware, 484 F. Supp. 2d at 1080 (preliminarily approving settlement given the anticipated expense and complexity of further litigation). These benefits are the product of extensive armslength negotiations conducted by parties and counsel with the benefit of over a year of vigorous litigation and hard-fought discovery to inform their discussions. (Infante Decl. 24); see Vasquez v. Coast Valley Roofing, Inc., 266 F.R.D. 482, 489 (E.D. Cal. 2010) (A settlement following sufficient discovery and genuine arms-length negotiation is presumed fair.). 1. Enhanced Notice and New Controls for All Class Members
Significantly, the settlement provides for enhanced notice and several innovative controls that will give all users (and minor users parents) significant transparency and control over whether their Likes and activities are rebroadcast to their friends in a sponsored context. This proposed relief squarely addresses the core concerns raised by Plaintiffs and would benefit all Facebook users. Plaintiffs cannot seriously dispute that the SRRwhich they concede applies to all users establishes consent to broadcast users name and profile picture [in] associat[ion] with commercial, sponsored, or related content (such as a brand [the user] like[s]) and gives Facebook permission to 16
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use [the users] name and profile picture in connection with that content . . . . (Muller Decl. Ex. I, at FB_FRA_000530.) Rather, Plaintiffs allege that Facebook failed to provide adequate notice to users that their Likes and actions could beor had beenpublished in Sponsored Stories. (SAC 36-41; Brown Decl. Ex. AA, at 10-11.) In addition, they allege that users were unable to prevent the rebroadcast of their Likes and other actions to their friends with sponsored content through an easily accessible mechanism. (SAC 32-34.) While these claims are insufficient to establish a violation of Section 3344, Facebook nevertheless has agreed for settlement purposes to classwide relief that addresses each of these concerns. First, Facebook has agreed to eliminate any alleged ambiguity concerning Facebooks use of names and/or profile pictures in sponsored content by: (i) enhancing the notice and consent provision contained in Facebooks SRR; and (ii) specifically illustrating the circumstances under which Facebook may display users Likes and actions in Sponsored Stories. (Decl. of Robert S. Arns in Supp. of Mot. for Prelim. Approval of Class Action Settlement (Arns Decl.) Ex. 1, 2.1(a), ECF No. 184-1.) Second, Facebook has agreed to engineer an innovative new tool that would permit each user to view a log of content they have shared (if any) that has been rebroadcast in a Sponsored Story, thus providing a level of transparency that is unprecedented on the Internet. (Id. 2.1(b).) Finally, Facebook will create a granular control that will allow users, upon viewing content that has been rebroadcast, to prevent further publication in additional Sponsored Stories, if they so desire. These proposed changes provide the very relief Plaintiffs and other litigants have sought and confer substantial benefits on all Facebook users, but without the significant risks and costs associated with continued litigation. See Officers for Justice, 688 F.2d at 628 (approving settlement that would halt practices at the core of plaintiffs complaint even where monetary compensation was potentially less than complete). Indeed, Facebook believes that these changes would go far beyond the controls and tools offered by any other company in the online media industry. (See Tucker Decl. 58; Infante Decl. 22-23.) Given the reluctance of courts to micro-manage the business of defendants, it is likely that Plaintiffs would not obtain such comprehensive relief even if they were to prevail on their claims in future litigation. (Infante Decl. 15.)
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2.
Additional Settlement Benefits for the Minors Subclass
In addition to the significant benefits applicable to all members of the class, the settlement contains several additional benefits specifically addressing the claims asserted by the minors subclass, which would strengthen and expand parental oversight and control over sharing by minors that may be associated with social advertising. First, Facebook has agreed to revise the SRR to clarify and confirm that any minor using Facebook has obtained parental consent to the expanded provisions specifically addressing use of users names and likenesses in connection with sponsored content. (Arns Decl. Ex. 1, 2.1(c)(i).) Second, the settlement requires Facebook to create a new tool that gives parents a direct mechanism to prevent the names and likenesses of their minor children from appearing in Sponsored Stories. (Id. 2.1(c)(ii).) And finally, Facebook has agreed to expand its efforts to educate its users about these new parental controls, including by launching a dedicated area of Facebooks existing Family Safety Center that will provide detailed information about social advertising on Facebook and advise parents of the ability to control how or whether minors may appear in Sponsored Stories. (Id.) These efforts will supplement Facebooks already extensive programs designed to protect minors on its servicewhich include, among other things, frequent consultations with a Safety Advisory Board comprised of independent experts in cyber-stalking, cyber-bullying, and other online risks potentially affecting children. (Gutkin Decl. Ex. J.) Here, minor Plaintiff W.T.like various other plaintiffs who have purported to challenge Facebooks social advertising on behalf of minors using Facebookhas focused heavily on the absence of any parental mechanism for withholding consent or preventing minors from appearing in sponsored content. (SAC 41; see Notice of Transfer of Related Action Ex. B, ECF No. 98-2.) The proposed settlement directly addresses this complaint by creating toolsavailable to every parent of every user under the age of 18that will establish ultimate control over whether their minor childrens activity is rebroadcast in Sponsored Stories. The substantial and direct benefits to the proposed minors subclass thus is closely related to the statutory provisions and claims at issue here, as in other approved settlements on behalf of a class of minor litigants. See, e.g., Mendoza v. Tucson Sch. Dist. No. 1, 623 F.2d 1338, 1342 (9th Cir. 1980) (affirming settlement of school desegregation class action on behalf of minors, pursuant to which defendant agreed to adopt a desegregation plan, examine 18
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various policies, and make a host of program improvements), overruled on other grounds by Evans v. Jeff D., 475 U.S. 717 (1986); D.S. ex. rel. S.S. v. N.Y.C. Dept of Educ., 255 F.R.D. 59 (E.D.N.Y. 2008) (approving settlement of class action on behalf of minors alleging that defendant deliberately denied minority students a high school education, where settlement obligated defendant to notify students of their right to attend school until age 21, instituted a program to monitor compliance, and provided minors with an array of compensatory education services). 3. Substantial Cy Pres Award to Nationwide Online Privacy Groups
Finally, Facebook has agreed to make a substantial cy pres distribution in the amount of $10 million to leading nationwide organizations that focus on the precise areas of Plaintiffs concern. (Mot. 23-24 & Ex. 1); see, e.g., Nachshin v. AOL, LLC, 663 F.3d 1034, 1036 (9th Cir. 2011) (Cy pres distributions must account for the nature of the plaintiffs lawsuit, the objectives of the underlying statutes, and the interests of the silent class members, including their geographic diversity.). Specifically, the proposed organizationsnone of which has any significant prior affiliation with Facebookfocus on consumer protection, research and education concerning online privacy and the safe use of social media technologies, with a particular emphasis on protecting the interests of minors. A detailed description of the mission of each proposed recipient and the relationship between the proposed recipient and Facebook, if any, is attached hereto as Exhibit A. It is well-settled in the Ninth Circuit that such cy pres relief is particularly appropriate where, as here, there are a large number of class members but individual recovery would be modest and difficult to administer and distribute. (See Infante Decl. 19-20); see, e.g., Six (6) Mexican Workers v. Ariz. Citrus Growers, 904 F.2d 1301, 1305 (9th Cir. 1990); In re Google Buzz Privacy Litig., No. C 10-00672 JW, 2011 WL 7460099, at *1, *4 (N.D. Cal. June 2, 2011); Catala v. Resurgent Capital Servs. L.P., No. 08-cv-2401 NLS, 2010 WL 2524158, at *4 (S.D. Cal. June 22, 2010) ([T]he de minimus [sic] recovery of approximately 13 cents per class member would make distribution to [195,561] class members impracticable because of the burden and expense of distribution.). In this case, the proposed class consists of more than 100 million Facebook users whose Likes and actions have been rebroadcast in one or more Sponsored Stories. (Oppn Br. 7.) Despite the unprecedented size of the class, the potential recovery to individual users would be trivialmeasured 19
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in cents rather than dollars for all but the most prolific Facebook users. See Section II(A)(5), supra. Moreover, the administrative costs and burden associated with assessing individual economic damages for millions of individual class members would be extraordinary, given that the activities and endorsement value of individual users, and the price of individual Sponsored Stories, vary widely within the class. Likewise, although Facebook believes that Plaintiffs cannot pursue statutory damages in lieu of economic damages at all, see id., assessing individual entitlement to statutory damages would prove unduly burdensome because: (i) statutory damages are available only to class members who survive the fact-intensive actual damages analysis, see 3344(a) (statutory damages available only when actual damages are less than $750); and (ii) determining the appropriate distribution of damages would require the individual analysis of billions of Sponsored Stories. This further supports the merits of cy pres relief here. See Six (6) Mexican Workers, 904 F.2d at 1305 (Federal courts have frequently approved [cy pres distribution] where the proof of individual claims would be burdensome or distribution of damages costly.); (Infante Decl. 16-18.) Notably, while the emergence of privacy-related class actions directed to online companies is a relatively new phenomenon, virtually every approved settlement of a class action involving Internet-based privacy claims has involved a pure cy pres distribution coupled with injunctive relief, analogous to the terms of the settlement proposed here. See In re Google Buzz, 2011 WL 7460099 (N.D. Cal. June 2, 2011) ($6.1 million cy pres distribution); Stipulation of Settlement and Release, Valentine v. NebuAd, Inc., No. 3:08-cv-05113-TEH (N.D. Cal. Aug. 16, 2011), ECF No. 233-1 ($2.41 million cy pres distribution, less attorneys fees, costs, and incentive awards); Final Order and Judgment, In re Quantcast Advertising Cookie Litig., No. 2:10-cv-05484-GW-JCG (C.D. Cal. June 13, 2011), ECF No. 83 ($2.4 million cy pres distribution, less attorneys fees, expenses, and incentive awards). These settlements undoubtedly reflect the unique challenges and complexity of distributing and determining damages in the context of a heterogeneous nationwide user base comprising millions of individuals in actions involving rapidly changing technologies. 4. Retired Judge Edward Infante Determined that the Settlement provides tremendous benefits to the class and to the public
Retired Judge Edward Infante has confirmed the substantial value of these benefits to the 20
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class and the integrity of the process through which they were negotiated, providing further support for preliminary approval of the settlement. See In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 948 (9th Cir. 2011) (the presence of a neutral mediator [is] a factor weighing in favor of a finding of non-collusiveness); In re HP Laser Printer Litig., No. 07-0667 AG, 2011 WL 3861703, at *4 (C.D. Cal. Aug. 31, 2011) (approving settlement where neutral mediator concluded that parties had negotiated in good-faith and at arms-length to reach an appropriate compromise). In his role as a neutral mediator, Judge Infante participated extensively in the negotiations that led to the eventual settlement of this case. Over the course of several months, he presided over an all-day mediation between the parties, supervised ongoing settlement discussions, evaluated correspondence, communicated frequently with counsel, and reviewed briefing and evidence submitted in this case. (Infante Decl. 2-4, 24.) Intimately familiar with Plaintiffs concerns and the strength of their claims, Judge Infante determined that the proposed settlement represents a highly favorable outcome for Plaintiffs and provides tremendous benefits to the class and to the public. (Infante Decl. 24.) Moreover, having participated directly in the settlement proceedings and months of negotiations between the parties, he found no indication whatsoever of collusion . . . . (Id.) To the contrary, given the intensity of the adversarial process he observed, Judge Infante concluded that the settlement resulted from fully-informed, arms-length negotiations and bears all the hallmarks of procedural fairness. (Infante Decl. 24); see Vasquez, 266 F.R.D. at 490.2
Facebook is aware that putative intervenors contend that certain features of the settlement, such as the attorneys fee provision, warrant additional scrutiny. (Proposed Pls.-Intervenors Mot. for Intervention 8-9, ECF No. 187.) Because the settlement agreement does not provide for a set amount of attorneys fees and Plaintiffs counsel has not yet moved for an award, this challenge is premature. More fundamentally, it is wrong. As an initial matter, Facebook has not agreed that a fee award in any particular amount would be reasonable or appropriate. (See Arns Decl. Ex. 1, 2.3.) Instead, Facebook has preserved its ability to terminate the agreement if the Court awards a fee over a certain amount. (Id.) Facebook is not alone in recognizing the propriety of this structure. Indeed, Judge Infantes unbiased opinion that the settlement agreement [has] no indication whatsoever of collusion belies any self-serving accusations made by putative intervenors to the contrary. (Infante Decl. 24); see In re HP Laser Printer, 2011 WL 3861703, at *4 (approving settlement blessed by neutral mediator even where attorneys fees were disproportionate to class compensation, where unpaid claims reverted to defendant, and where the settlement contained a clear sailing provision). Moreover, unlike in the cases cited by putative intervenors, the estimated value here of the settlement to class members is not disproportionate to the potential fee award. To the contrary, the value of the injunctive relief to the class is substantial because it squarely addresses all of Plaintiffs core concerns. See In re HP Laser (Contd on next page) 21
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D.
Settlement Ensures Clarity and Resolution for Facebook, Its Users and Advertisers Although Facebook has numerous strong defenses to Plaintiffs claims and fully expects that
it would prevail on the merits, see Section II(A), supra, it is prepared to settle on the terms contained in the proposed settlement because it is in the best interests of Facebook, its users, and its advertisers to resolve this litigation on terms that establish clarity going forward with respect to its social advertising model. Facebook is an advertising-supported service, and the revenue derived from sponsored content like Sponsored Stories makes it possible for Facebook to offer its customized, highly-innovative service to hundreds of millions of users for free. (See Squires Decl. 56.) Moreover, Facebooks users derive significant benefits from social advertising: users choose to broadcast their Likes and actions to others on Facebook precisely because they want to share their support for the sponsor as broadly as possible, including in sponsored content. (Tucker Decl. 6.) Although millions of Facebooks users in the proposed class enjoy the free service that sponsored content enablesand desire to share or benefit from sharing their connections and affiliations through social advertisingFacebook has faced a continual stream of opportunistic litigation attacking this aspect of its business model. See Pls. First Am. Compl., C.M.D. v. Facebook, Inc., No. 3:12-cv01216-LHK (N.D. Cal. Apr. 20, 2012) (C.M.D. FAC), ECF No. 107) (alleging right of publicity claims based on Facebooks alleged failure to obtain parental consent for displaying minors names and likenesses in alleged advertisements); Class Action Compl., J.N.D. v. Facebook, Inc., No. 11-cv03287 (N.D. Cal. July 5, 2011), ECF No. 1 (suing under 3344 and the California Constitution based on same); Am. Class Action Compl., J.N. v. Facebook, Inc., No. 11-cv-2128 (E.D.N.Y. May 3, 2011) (J.N. FAC), ECF No. 2 (suing under New Yorks right of publicity statute based on same); First
(Contd from previous page) 24 25 26 27 28 Printer, 2011 WL 3861703, at *6 (The attorney fee award is reasonable compared to the degree of success, particularly regarding the injunctive relief obtained.) (emphasis added). Even without considering the value of the injunctive relief, the $10 million cy pres distribution more than justifies the potential award here. See Harris v. Vector Mktg. Corp., No. C-08-5198 EMC, 2012 WL 381202, at *5 (N.D. Cal. Feb. 6, 2012) (approving settlement where attorneys fees were on par with the money to the class and the cy pres combined (roughly 1:1) and the court was not faced with a situation where fees are disproportionate to the class award as in Bluetooth). 22
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Am. Class Action Compl., David Cohen v. Facebook, Inc., No. BC 444482 (L.A. Super. Ct. Apr. 26, 2011) (suing under 3344, the UCL and the California Constitution based on same). Under these circumstances, Facebook has determined that the proposed settlement furthers the best interests of the company and its users by establishing clarity with respect to the operation of social advertising on Facebook going forward. See Walter v. Hughes Commcns, Inc., No. 09-2136 SC, 2011 WL 2650711, at *11 (N.D. Cal. July 6, 2011) (noting that a settlement that is structured such that the interests of the class are tied to the interests of . . . the defendant demands less scrutiny). This case presents unique opportunities to resolve claims challenging the rebroadcast of users names and photographs in social advertising on a nationwide basis, since Plaintiffs here have asserted claims under California lawspecifically Section 3344 and the UCL. As Plaintiffs have conceded, under the California Supreme Courts decision in Washington Mutual Bank v. Superior Court, 24 Cal. 4th 906 (2001), California law must be applied to a nationwide class in view of the exclusive choice of law provision contained in Facebooks SRR, which provides that [t]he laws of the State of California will govern this Statement, as well as any claim that might arise between [the User] and [Facebook], without regard to conflict of law provisions. (Muller Decl. Ex. I, at FB_FRA_000531); Notice of Transfer of Related Action Ex. B, ECF No. 98-2 (holding SRR enforceable against plaintiffs).) This uniform choice of law provision is particularly critical in the context of Facebooks global social networking service; piecemeal application of different states laws to its service would result in inconsistent decisions and would be extraordinarily disruptive to Facebooks business operations. Cf. Gordon v. Virtumundo, Inc., 575 F.3d 1040, 1063 (9th Cir. 2009) (uniform standards governing email ensure that businesses do not have to guess at the meaning of various state laws when their advertising campaigns venture[] into cyberspace) (quotation marks and citation omitted); Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102, 1118 (9th Cir. 2007) (uniform definition of intellectual property under the CDA required given that material on a website may be viewed across the Internet, and thus in more than one state at a time). By settling claims asserted on behalf of a nationwide class under Californias right of publicity statute and unfair competition law following protracted litigation, Facebook is able to resolve the released claims on a basis that applies consistently to all users in the United States. At the 23
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same time, the settlement addresses claims filed by other plaintiffs who erroneously have challenged the display of social actions in sponsored content under different states laws, and who purport to represent individuals whose claims are addressed, in whole or in part, by the nationwide class relief obtained through the settlement in this case.3 In summary, this case presents the most appropriate vehicle to provide relief and resolution to all Facebook users in the United States concerning the effect and operation of social advertising on Facebook. On the one hand, users throughout the United States (and, where minors, their parents) will benefit from changes and tools that provide significant visibility and control over how and whether their Likes and activities are shared in Sponsored Stories, as well as a significant cy pres distribution to nationwide online privacy organizations. On the other, Facebook will be able to focus on operating a free, innovative service for all users with clarity as to its rights to display social advertising under the SRR and without the distraction of continued opportunistic litigation. See Donovan v. Estate of Fitzsimmons, 778 F.2d 298, 309 (7th Cir. 1985) (affirming settlement of class action against pension fund, where the resolution would have the benefit of ending years of litigation over the past history of the Fund and freeing the current trustees and personnel to attend to the task of managing the Fund). E. The Court Should Find that Facebook Complied with CAFAs Notice Procedures and Approve the Content and Manner of Transmitting the Class Notice. Facebook, through the settlement administrator, provided notice to the appropriate state and
Indeed, these analogous claims often consist of near-verbatim recitations of those raised by Plaintiffs and rest on the same proof. Compare SAC 45 ([I]f you compare an ad without a friends endorsement, and you compare an ad with a friends [Facebook] Like . . . on average, 68% more people are likely to remember seeing the ad with their friends name. A hundred percentso two times more likely to remember the ads message; and 300% more likely to purchase.) with C.M.D. FAC 27 (This study found that the addition of apparent endorsements strongly impact the three key measures of an advertisements effect. The study documented a 60% increase in ad recall, a 100% increase in ad awareness and a 300% increase in purchase intent.); compare SAC 41 (Where a Member is a minor, no consent for use of the Members name, photograph, likeness or identity is sought or received from the minors parent or legal guardian.) with Pls. Original Compl., C.M.D. v. Facebook, Inc., No. 3:11-cv-00461 (S.D. Ill. June 1, 2011) 23, ECF No. 2 (Defendant used and continues to use Plaintiffs name and photographs for the purpose of marketing, advertising, selling and soliciting the purchase of goods and services knowing that Plaintiffs, as minors, lack the capacity to consent to such use and without obtaining consent of Plaintiffs parents or guardians.). 24
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federal officials pursuant to the Class Action Fairness Act of 2005 (CAFA). (See Declaration of Jennifer M. Keough, filed concurrently herewith; Arns Decl. Ex. 1 3.4.) Because the notice was sent to the proper individuals and contained the required information, 28 U.S.C. 1715(b), the Court should find that Facebook complied with CAFAs notice procedures. See id. 1715(d). Additionally, the Court should find that the content of the proposed notice to the Class and Minor Subclass of the Settlement meets the standard of applicable law since the notice generally describes the terms of the settlement in sufficient detail to alert those with adverse viewpoints to investigate and to come forward and be heard. Goldkorn v. Cnty. of San Bernardino, No. 06707 VAP, 2012 WL 476279, at *10-11 (C.D. Cal. Feb. 13, 2012) (citation omitted). The long-form notice, attached as Exhibit B to the Settlement, identifies Plaintiffs and Facebook, contains sufficient information to allow class members to make an informed choice to accept or reject the Settlement, and contains detailed instructions for requesting exclusion from, objecting to, or participating in the Settlement, as well as the schedule for final approval and attorneys fees hearings. Additionally, the tiered notice plan, with the short-form notice by electronic mail (or Facebook messaging) and publication notice directing potential class members to the long-form notice on the Internet, is similar to plans previously approved by this Court. See In re TD Ameritrade Account Holder Litig., No. 07 2852 SBA, 2011 WL 4079226, at *10 (N.D. Cal. Sept. 13, 2011) (granting final approval of notice plan of: (1) summary notice mailed via postcard or email; (2) summary notice issued in USA Today; and (3) posting of a full (long-form) notice on a public website maintained by the notice provider.). III. CONCLUSION
For the reasons set forth above and in Plaintiffs Motion, the proposed settlement meets the standards for preliminary approval under Rule 23(e). Facebook respectfully requests that the Court preliminarily approve the proposed settlement. DATED: June 29, 2012 Respectfully submitted, COOLEY LLP By: /s/ Michael G. Rhodes Michael G. Rhodes Attorneys for Defendant FACEBOOK, INC.
1276081/SF
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1 2 3 4 5 6 1. 7 2. 8 3. 9 10 11 12 13 7. 14 15 16 17 18 10. 19 11. 20 21 22 C. 23 24 1. 25 2. 26 3. 27 4. 28 B. 9. 8. 4. 5. 6. I. II.

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Sponsored Stories. 2. Users Impliedly Consented to Appear in Sponsored Content

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Additional Settlement Benefits for the Minors Subclass

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